Interfacultary Research InstitutesFaculty of Economics and Business (FEB)

Institute

Amsterdam Center for Law & Economics (ACLE)Amsterdam School of Economics Research Institute (ASE-RI)

Abstract

One of the most puzzling issues in economics is the huge divide between the North and South of Italy despite more than 150
years of common formal institutions. We document that the opening of the present-day gap in culture and economic outcomes
is the consequence of the region-specific tax policies selected between 1861 and 1911 by the elite of the Kingdom of Sardinia,
which annexed the rest of Italy in 1861. Regional pre-Unification tax revenues indeed are mainly explained by the contemporaneous
farming productivity but not by the region's political relevance for the Kingdom of Sardinia's elite, whereas the opposite
is true for the post-Unification period. Moreover, tax distortions, tax-collection costs, and each region's political relevance
significantly shaped the increasing post-Unification differences in income per capita, electoral turnout, and human capital
between the North and the South. This evidence, which is consistent with a two-region, two-social class model, sheds new light
on the incentives of a dominating group in a political or economic union, e.g., the European Union.

Disclaimer/Complaints regulations

If you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let
the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the material inaccessible
and/or remove it from the website. Please Ask the Library, or send a letter to: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands.
You will be contacted as soon as possible.